Essay on Alcatel Accounting Case

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A. What is an account receivable? What other names does it go by?

Accounts receivable are amounts owed by customers on account. They result from the sale of goods and services on credit. These receivables are generally expected to be collected within 30 to 60 days. They are typically the most significant type of claim held by a company. Accounts receivable and notes receivable resulting from sales are also known as trade receivables. Accounts receivable resulting from sales are referred to as trade receivables in Alcatel's financial statements.

B. How do accounts receivable differ from notes receivable?

Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt. A credit instrument …show more content…
Confirm the figures reported by Alcatel's CFO using data for trade receivables from the accompanying financial statements. Assume that all sales are on account. That is, they are all ‘credit sales.' Comment on the trend. Provide possible reasons for change.

Average Collection Period - Using Trade Receivables (Net) 2002 365 = 365 = 104 (16,547 / 4,716) 3.509 2001 365 = 365 = 117 (25,353 / 8,105) 3.128

The figures reported by CFO Jean-Pascal Beaufret are correct. Alcatel was able to collect their receivables faster in 2002. They made a strong push to turn their collectibles into cash, which was needed for the survival of the company. It helped their stock price increase. This proved to investors that the company was now turning the corner in its restructuring program. It also helped put an end to worries the company could go belly up because it would not be able to cut costs as quickly as sales were falling. The sales were down for 2002 because of the telecommunications bust occurring
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